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EXHIBIT 99.2
AGREEMENT
NOVEMBER 19, 1998
This document sets forth an agreement (this "Agreement") between Philip
Services Corp. ("PSC") on behalf of itself and each of its affiliates
(collectively, "Affiliates"), Foothill Partners III, L.P. ("Foothill"), American
Real Estate Holdings, L.P. ("AREH") and High River Limited Partnership ("High
River"), regarding the terms and conditions for a prepackaged plan of
reorganization for PSC and its Affiliates (the "Plan"), pursuant to which a
restructuring of PSC and its Affiliates will be accomplished, and related
agreements. For purposes of this Agreement, the term "Existing Secured Lenders"
means the lender parties to the existing Credit Agreement (the "Existing Credit
Agreement") dated as of August 11, 1997 among PSC; Philip Services (Delaware),
Inc.; Canadian Imperial Bank of Commerce ("CIBC"), as Administrative Agent;
Bankers Trust Company ("BTCo"), as Syndication Agent; CIBC and BTCo, as
Co-Arrangers; Dresdner Bank Canada and Dresdner Bank AG New York Branch, as
Documentation Agent; and the various lenders from time to time parties thereto,
including all amendments and modifications thereto. For purposes of this
Agreement, the term "Majority Existing Secured Lenders" means, collectively,
holders of not less than two-thirds (2/3) of the outstanding indebtedness under
the Existing Credit Agreement.
WHEREFORE, for good and valuable consideration, the adequacy, sufficiency
and receipt of which is hereby acknowledged, PSC, High River, AREH and Foothill
agree as follows:
Principal Economic Terms of Plan: Subject to an adjustment mechanism
(limited solely to an adjustment of the
percentage of reorganized PSC common
stock to be distributed to existing PSC
shareholders) to be mutually agreed upon
by the parties hereto in the event that
assets of PSC or its Affiliates are sold
and the proceeds thereof used to repay
indebtedness under the Existing Credit
Agreement prior to the consummation of
the Plan, existing PSC shareholders
will receive a pro rata share of 10% of
reorganized PSC's common stock and the
Existing Secured Lenders will receive a
pro rata share of 90% of reorganized
PSC's common stock, provided however
that in no event shall existing PSC
shareholders receive more than 15% of
reorganized PSC's common stock in
aggregate.
Reorganized PSC will have aggregate pro
forma debt of $300 million, excluding
Unimpaired Debt as defined below (the
"New Notes"), which will have terms and
conditions mutually acceptable to PSC
and the Majority Existing Secured
Lenders (including Foothill, AREH and
High River). $200 million of the New
Notes will be secured by a first
priority lien on all assets of PSC and
its Affiliates and will be distributed,
on a pro rata basis, to the Existing
Secured Lenders. $100 million of the New
Notes will be unsecured and will be
distributed in full and final settlement
of non-ordinary course liabilities,
direct and indirect, of PSC and its
Affiliates (other than claims of the
Existing Secured Lenders).
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Liabilities and accruals of PSC and its
Affiliates incurred in the ordinary
course of business will be unimpaired
("Unimpaired Liabilities").
Other Plan Provisions: All other provisions of the Plan and any
related documents and agreements, which
shall not be inconsistent with the terms
and conditions of this Agreement, shall
be reasonably acceptable to PSC, the
Majority Existing Secured Lenders and
High River, AREH and Foothill.
Plan Timetable: PSC and, if necessary, certain
Affiliates to be mutually determined by
PSC and the Majority Existing Secured
Lenders, will commence, in a venue
mutually agreeable to PSC and the
Majority Existing Secured Lenders,
voluntary insolvency proceedings (the
"Cases"), including the filing of the
Plan and accompanying disclosure
statement (the "Disclosure Statement"),
not later than February 28, 1999.
The Disclosure Statement shall be
approved by the court presiding over the
Cases (the "Court") not later than April
15, 1999.
The Court shall confirm the Plan not
later than June 30, 1999.
The Plan shall become effective not
later than July 30, 1999.
Standstill and Efforts to Consummate: Subject to the provisions of subparts
(a) and (d) under the heading
"Termination Event" below, each of High
River, Foothill and AREH hereby agrees
that neither they, nor any of their
respective affiliates, officers,
directors, partners or agents shall (a)
commence any involuntary insolvency
proceeding against PSC or any of its
Affiliates under the laws of the United
States, Canada or any other country or
any state or province, (b) except to the
extent that PSC or any of its Affiliates
are the subject of any insolvency
proceedings, initiate any legal action
against PSC or any of its Affiliates
with respect to any claims against or
interests in PSC or any of its
Affiliates or (c) take or encourage any
other party to take any action
inconsistent with (a) or (b) above
(including without limitation giving any
direction to the agent for the Existing
Credit Agreement), unless and until a
Termination Event (defined below)
occurs.
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Each of High River, AREH and Foothill
hereby agrees, and agrees to cause any
affiliate that holds or may hereafter
hold PSC debt, to enter into the Lock-Up
Agreement (defined below) on or before
December 15, 1998.
Each of High River, AREH and Foothill
agrees that it shall not sell, assign or
otherwise transfer any indebtedness of
PSC to any other person or entity unless
such person or entity agrees in writing
to be bound by the terms and conditions
of this Agreement as if such person or
entity were a signatory hereto.
Subject to the terms and conditions
hereof, until the occurrence of a
Termination Event, PSC shall take all
reasonable actions to seek to effectuate
the transactions set forth herein.
Termination Event: This Agreement and the obligations of
the parties hereto shall expire upon the
earliest to occur of the following (each
a "Termination Event"); provided,
however, that PSC's obligations set
forth under the heading "Board of
Director Changes" below shall survive
any Termination Event:
(a) failure of PSC and the Majority
Existing Secured Lenders (including High
River, AREH and Foothill) to enter into
a binding agreement consistent with the
terms and conditions of this Agreement
("Lock-Up Agreement"), on or before
December 15, 1998, pursuant to which the
Majority Existing Secured Lenders agree
to vote for the Plan. The Lock-Up
Agreement shall be in form and substance
mutually acceptable to PSC and the
Majority Existing Secured Lenders
(including High River, AREH and
Foothill);
(b) failure of PSC to meet any of the
deadlines set forth under "Plan
Timetable" above;
(c) failure of PSC to satisfy its
obligations set forth under the heading
"Board of Director Changes" below (which
failure may be enforced by injunctive
action despite the occurrence of a
Termination Event) or the failure of
PSC's shareholders to elect the New
Directors (defined below) to the Board;
and
(d) PSC seeking to implement an
Alternative Transaction that has been
approved by the Majority Existing
Secured
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Lenders but has not been approved by High River,
AREH and Foothill.
Alternative Transactions: Notwithstanding anything in this Agreement to the
contrary, PSC maintains at all times (both before
and after execution of the Lock-Up Agreement and
the filing of the Plan) the right to pursue,
negotiate with any third party, and seek to
implement, any potential transaction that
restructures substantially all of PSC and its
Affiliates' debt and equity and that PSC believes,
in its reasonable discretion, may result in a more
favorable outcome to PSC and its stakeholders (an
"Alternative Transaction") than the transactions
set forth in this Agreement or the Plan. If PSC
determines that any Alternative Transaction may
result in a more favorable outcome to PSC and its
stakeholders than the transactions set forth in
this Agreement or the Plan, PSC shall have the
right to present such Alternative Transaction to
the Existing Secured Lenders for their
consideration; provided, however, that PSC shall
not seek to effectuate any Alternative Transaction
that does not pay the claims of the Existing
Secured Lenders in full in cash or that has not
been approved by the Majority Existing Secured
Lenders in their reasonable discretion.
Board of Director Changes: Upon the execution of this Agreement, High River,
AREH and Foothill jointly shall have the right to
designate a total of two (2) persons to serve on
PSC's Board of Directors, one of whom must be a
Canadian resident and one of whom must be a United
States resident (collectively, the "New
Directors"). In addition, the New Directors shall
be nominated by PSC management for re-election to
the Board at any PSC shareholders meeting that is
conducted between the date hereof and the earlier
to occur of (x) the effective date of the Plan or
any Alternative Transaction (approved by the
Majority Existing Secured Lenders), (y) a breach of
this Agreement by High River, AREH or Foothill and
(z) such date as High River, AREH and Foothill,
collectively, hold less than $50.0 million in
principal amount of indebtedness owing by PSC. The
New Directors shall serve on PSC's Board until the
earlier of (a) the designation of a new Board of
Directors, if any, pursuant to the Plan or an
Alternative Transaction
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(approved by the Majority Existing
Secured Lenders), (b) such date as High
River, AREH and Foothill, collectively,
hold less than $50.0 million in
principal amount of indebtedness owing
by PSC and (c) a breach of this
Agreement by High River, AREH or
Foothill. As promptly as practicable
after the designation of the New
Directors, PSC shall, in good faith,
take all appropriate corporate
governance actions to effectuate the
addition of the New Directors to the
Board of Directors, and will thereafter
take all appropriate action to
effectuate the replacement by High
River, AREH and Foothill of any one or
more New Directors as may be required
due to death, resignation or other
inability to serve. At no time hereafter
shall PSC or any of its Affiliates take
or cause to be taken any action to
change the ratio of all Directors to New
Directors on PSC's Board.
Search Committee: Immediately following the appointment of
the New Directors, a special committee
of the Board shall be formed (consisting
of no more than 3 Directors, one of whom
shall be a New Director) for the purpose
of commencing a search for a permanent
CEO for PSC.
Governing Law and Enforcement: This Agreement shall be governed by the
laws of the State of Delaware, without
giving effect to choice of law
provisions thereunder.
The parties hereto acknowledge that
monetary damages may not provide a
sufficient remedy for a breach of this
Agreement, and thus hereby consent to
the entry of equitable remedies
including injunctive relief and consent
to the jurisdiction of the Federal
District Court in Delaware.
Public Announcements: The parties hereto agree that all
public announcements of the entry into
or the terms and conditions of this
Agreement shall be mutually acceptable
to each of them; provided, however,
that if agreement among such parties
cannot be reached, each of them may
issue any statement or make any
announcement it deems necessary or
appropriate. It is understood that on
the date hereof, PSC intends to
announce a letter of intent among PSC,
Soule Enterprises LLC and another third
party.
Agreed, acknowledged and accepted
as of the date first written above:
PHILIP SERVICES CORP.
By:
______________________________ _______________________________
Its:
_______________________________ _______________________________
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Agreed, acknowledged and accepted
as of the date first written above:
FOOTHILL PARTNERS III, L.P.
By:
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Its: Managing General Parnter
AMERICAN REAL ESTATE HOLDINGS, L.P.
By: American Property Investors, Inc.
Its: General Partner
By:
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Its:
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HIGH RIVER LIMITED PARTNERSHIP
By: Riverdale L.L.C.
Its: General Partner
By:
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Its:
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